US stocks end week lower after jobs data bolster case for Fed tightening

US stocks slid to another weekly loss on Friday, after the latest batch of data on the labour market reinforced expectations for aggressive monetary policy tightening from the Federal Reserve.

The blue-chip S&P 500 index fell 1.6 per cent on the day, cutting into gains made on Thursday and finishing the week 1.2 per cent lower. The tech-heavy Nasdaq Composite also declined, down 2.5 per cent and giving up 1 per cent for the week.

The S&P 500 has declined in eight of the past nine weeks, with a brief reprieve last week when it gained 6.6 per cent.

The report from the US Department of Labor on Friday morning showed the world’s biggest economy added 390,000 jobs last month, modestly below the 436,000 in April. However, the May figures still exceeded expectations for 325,000.

Investors are keeping a keen eye on the state of the jobs market as they assess how quickly they expect the Fed to raise interest rates. Policymakers have already lifted the central bank’s main rate by 0.75 percentage points this year and are expected to follow up with further aggressive tightening of monetary policy as they attempt to tamp down inflation. While the Fed seeks to foster maximum employment, an excessively hot jobs market can add to inflationary pressures.

Peter Boockvar, chief investment officer at Bleakley Advisory Group, noted that while the numbers were not a “blowout” performance, they still reinforce expectations for an “aggressive Fed response”.

US government debt came under some selling pressure following the jobs report, with the yield on the monetary policy sensitive two-year Treasury note rising 0.03 percentage points to 2.66 per cent. The 10-year yield, which more closely tracks the longer-term economic outlook, rose 0.04 percentage points to 2.96 per cent.

Both of these benchmark bond yields have jumped since the start of the year but have receded from their recent highs.

In equities, shares in Tesla fell 9.2 per cent on Friday after Reuters reported that chief executive Elon Musk told employees he had a “super bad feeling” about the economy and that the carmaker may need to cut about 10 per cent of its workforce.

Meanwhile, the regional Stoxx Europe 600 gauge gave up earlier gains, moving 0.3 per cent lower for the day, having closed the previous session 0.6 per cent higher. Germany’s Dax also eased following the US open. UK markets were closed for a public holiday, as were markets in Hong Kong and mainland China.

European shares began heading lower after April eurozone retail sales fell 1.3 per cent from a month before, the first monthly drop since the start of the year. On a year-on-year basis, sales rose 3.9 per cent. Economists polled by Reuters had expected a 0.3 per cent monthly rise and a 5.4 per cent yearly increase.

Analysts at ING said weak consumer confidence and high inflation had weighed on the region’s economy. “While this decline may overstate total consumption developments, it does provide further evidence of a serious eurozone slowdown,” they wrote.

The retail sales figure followed on from stronger than expected economic data from Germany, with the country’s exports rising 4.4 per cent between March and April.

Brent crude settled just shy of $120 a barrel. Opec and its allies on Thursday reached an agreement to accelerate oil production in July and August. The dollar index, which measures the US currency against a basket of six others, moved 0.3 per cent higher.